Can a non-profit run with a for-profit model?

Suzaku · 09-12-2009, 05:38 PM

Hello forum,

I don't know if this is possible, but...

I would like to set up a business that runs web sites with a for-profit mindset (e.g., competes on features, offers monthly subscriptions) and uses all profits to fund medical research. Would that be possible?

Based on a few things I've read (non-comprehensive, admittedly), it seems like the main difference between a non-profit and a regular business is that non-profits have no stock, so it might be feasible. (That, or my ignorance betrays me.

)

If anyone could help, I would appreciate it.

Thanks,

Steven

ethansmith · 09-13-2009, 12:01 AM

I am not an attorney, but maybe making your services payable by a "suggested donation" rather than set cost would make things a bit more feasible?

You might want to take this one to your local lawyer...

Suzaku · 09-13-2009, 01:56 PM

Thanks Ethan. Though the info looks scraped from elsewhere, gaebler.com (link excluded per forum permissions) says:

Quote:

7. Begin fundraising

You can begin fundraising as soon as you have applied for your 501(c)(3). When fundraising, keep in mind that funds can come from a variety of sources ranging from straight donations to fees for service. Talk with your board to decide which fundraising efforts will be most productive for your organization.

Fee for service looks like what I want, so that looks like a viable option.

I'll consult my local Chamber of Commerce to verify when I get closer to moving forward.

Thanks again,

Steven

ethansmith · 09-13-2009, 06:36 PM

Awesome. Glad you found the answer. Good luck with the venture, and I hope a lot of people are helped from the revenues you generate.

DerekS · 09-13-2009, 08:09 PM

What separates a non-profit from a for-profit is that excess funds (aka profits) are not distributed to stockholders or investors. These funds are put back into the business to further the cause. You can be as aggressive as you'd like, as long as your business model is to further the propagation of your core values, rather than line the pockets of your investors.

Suzaku · 09-14-2009, 05:35 AM

Quote:

Originally Posted by DerekS

What separates a non-profit from a for-profit is that excess funds (aka profits) are not distributed to stockholders or investors. These funds are put back into the business to further the cause. You can be as aggressive as you'd like, as long as your business model is to further the propagation of your core values, rather than line the pockets of your investors.

That's what I want.* Thanks Derek!

Steven

* i.e., I see viable scientific options to help alleviate certain social problems and want to fund them into existence, patent them, then release the patent into the public domain so that they're available cheaply.

Online Money Hut · 09-14-2009, 10:59 PM

Sure you can run a non-profit with a for-profit mind set. The only difference between the 2 are the tax id classification and that one has the main goal of making a profit while the other has the main goal of providing a social service.

Frederick

jaz · 10-12-2009, 05:14 AM

i think the ways to get funds like what you stated are fine. what matters at the end of the day is where do the funds go...if it's not for the benefit of one or few private individuals, then you're ok.

paul2145r · 10-12-2009, 11:04 AM

You shouldn't have any difficulty with running the websites that way, but you have to make sure to check your state's regulations regarding DBA's. If you are wanting the web sites to run under the umbrella of the Non-prof, and they will be different projects, then make sure to set up a DBA for each one. This will keep everything under the same umbrella without having to register 501(c)(3)'s for each individual project.

This type of thing is done by many of the larger charities. They have various donation lines, drives, and independent ventures that benefit the venture.

If, however, you plan on pulling any of the profit of any of the projects for yourself, then set up that specific project as an LLC or corp, then donate everything other than what you are keeping to the non-prof. On the taxes for the LLC or corp, list that amount under charitable donations (also check the fed/state regulations in case there is a cap on % of total revenues that can be used this way).

entrepreneurrebel · 10-12-2009, 11:21 PM

Yes and there is no need to use donations or any special wording. You will most likely give information to what your profits will goes to. Also to be not for profit you do not need to be 501(c)(3). 501 (c)(3) helps with taxes and gives your company a legit stand but it is not needed to use the wording. Now understand if it is found that you are taking a part of the profit directly that can fall under many laws, esp FTC Act.

You do, as many others above have stated, need to incorporate like any other company. I am a fan of LLCs and not some much of Inc.